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Rising unemployment and the blow from the Sept. 11 terrorist attacks this month caused the biggest fall in consumer confidence since the 1990 Persian Gulf crisis.

The 16.4-point decline in the Conference Board's consumer confidence index to 97.6 reported yesterday has been rivaled only four other times and is so big as to be associated with recessions and crises such as the 1974 Arab oil embargo and the 1987 stock market crash. Consumers surveyed between Sept. 1 and Friday reported a markedly deteriorating outlook for jobs and the economy.

The report reflects a sharp rise in unemployment from 4.5 percent to 4.9 percent announced on Sept. 7 as well as initial reaction to the strikes on the World Trade Center and Pentagon. Reports in coming weeks are likely to show a further slide in confidence reflecting fallout from the attacks, including a $1 trillion loss of stock market wealth and more than 100,000 layoffs, economists said.

The stock market, braced for the worst, showed little reaction to yesterday's report, with the Dow Jones Industrial Average managing to hold onto a 56-point gain to 8,660, spurred by bargain hunting.

Plunging confidence has caused a falloff in home sales from record levels set in August, the National Association of Realtors reported yesterday. Airlines and travel-related businesses are reeling from sharply reduced demand in the wake of the attacks, while hotels, restaurants, theaters and shopping malls also report substantially lower activity.

"The consumer has held up the economy and now confidence is collapsing," said economist Joel Naroff of Naroff Economic Advisers. "We are dealing with mass psychology here, and what may drive a move back to more normal lives is simply not clear."

Mr. Naroff said the report raises alarms because a return of confidence, which is at a 51/2-year low, may hinge in large part on how quickly the U.S. government moves to quell the terrorist threat and dissipate fears among American consumers. President Bush has been warning of a prolonged conflict that could take months or even years to resolve.

"There is little expectation that confidence will pick up until some military action is taken," Mr. Naroff said. "In 1991, after the successful end of the war, confidence surged. Since the current war will not have a clear endpoint, it is anybody's guess what will happen to confidence even after the first round of attacks."

Mr. Naroff said "massive government spending and aggressive action" by the Federal Reserve Board may be needed to make up for the slack in consumer spending and avert a deep recession. The Fed is expected to lower interest rates perhaps to their lowest levels in decades at a meeting next week.

Yesterday's report appeared to contribute a new sense of urgency to talks among Federal Reserve Chairman Alan Greenspan, former Treasury Secretary Robert Rubin and Senate lawmakers on whether to enact a second economic-stimulus bill.

Mr. Greenspan had urged lawmakers last week to wait a couple of weeks before pushing legislation but yesterday told senators that any stimulus plan should be "substantial," including around $100 billion in tax cuts and spending boosts, and aimed at putting a massive infusion of cash into the economy immediately.

"We heard much higher numbers today on the stimulus package from our two experts than I anticipated to hear," said Sen. Charles E. Grassley, Iowa Republican and ranking minority member of the Senate Finance Committee.

Mr. Greenspan and Mr. Rubin repeated their caution that Congress should avoid any quick dissipation of the $158 billion surplus that would raise alarms about a return of inflation next year and cause long-term interest rates such as mortgage rates to rise. That could stifle activity in the housing market, which is feeling aftershocks from the attacks and plummeting confidence, they said.

Lawmakers remain divided on whether the stimulus should be aimed more at promoting business investment, which has collapsed in the past year, or propping up sagging consumer demand.

David Orr, chief economist with First Union bank, said this month's loss of confidence was "ominous" because it was caused by a combination of proliferating layoffs and the shock of the attacks.

"Since the downturn appears to be driven by higher unemployment, there is less reason to expect a bounce," he said. Consumers' worst fears are likely to come true as companies continue cutting jobs and drive the unemployment rate potentially to 6 percent by the middle of next year, he said.

A sharp break in confidence resulting only from the attacks, by contrast, could be reversed just as suddenly if Mr. Bush were to achieve a quick victory in his campaign against terrorists, Mr. Orr said.

Underscoring the gravity for the economy, the Group of Seven finance ministers issued a statement yesterday saying the attacks had derailed economic recovery in the United States. Most economists say the economy is falling into a recession that is likely to last through the end of the year.